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TRANSCRIPT
Utilities Industry Report
Research in collaboration with
Focus your forces
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It’s about the core 7
Introduction 3
Visibility is everything 12
Table of contents
The multi-channel workforce is on the rise 4
The Pacesetters lead the pack 17
About the research 18
The external workforce: a C-suite imperative 16
Cost is not the whole story 10
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New technologies. Competition from nontraditional players. A shiftingregulatory environment. A retiring workforce. These are just some of theconcerns that utilities face today. In order to scale effectively in response to environmental events, address skills shortages, and position themselvesfor success, utilities rely heavily on external workers and services providers.
External resources with very specific skills—engineers, line technicians, heavy equipment operators and more—make up the backbone of utilitiesorganizations. With digital transformation coming into play, utilities are also engaging more highly specialized, in-demand resources in sectors such as IT. How can utilities and other companies gain better value from these non-payroll workers and services providers? To find out, we collaborated with Oxford Economics to survey 800 senior executives, including 50 utilities executives in more than a dozen countries. One-third are C-suite executives. Given the findings, the rapid growth of the external workforce is one of themost important business stories of our time, with far-reaching implications for both employers and employees. Yet most companies—utilities included—are still figuring out the best ways to manage this extended workforce, and C-level executives are not paying close enough attention. Those who manage external labor effectively say it drives competitive advantage, yet others risk being left behind. In our full report, we discuss the performance of the “Pacesetters” (see page 17), companies that report markedly superior performance in extracting value from the external workforce.
The results provide an unprecedented deep dive into the ways the external workforce is sourced, managed, and deployed—and how it can add value.
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Introduction
The external workforce: is it on your C-suite agenda?
Who’s who in the extended workforce?
Non-payroll workers (contingent labor): individuals hired by a company to do work on its behalf, but not as traditional employees. They could include independent contractors, consultants, or temporary labor, and could be contracted via staffing agencies, through freelance marketplaces, or sourced directly. Services providers: organizations such as consulting firms, marketing agencies, and facilities management companies. They are typically contracted to do project-based work via a Statement of Work (SoW).
External workforce: the combination of non-payroll workers and services providers (also known as an extended workforce).
On-demand, online marketplaces for freelancers: digital platforms that provide a mechanism to engage talent and match buyers and sellers of services.
Themulti-channelworkforce ison the rise
It’s aboutthe core
Visibility iseverything
Cost is notthe whole story
The External Workforce:Improving agility and competitiveness, driving better business outcomes
C-suite imperative
Key themes from our research
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Our research shows that approximately 42% of workforce spending in the utilities industry goes to contingent workers and services providers, close to the cross-industry average of 44%. These workers are deployed in a wide variety of roles across organizations. The shift to engaging the external workforce to do work is expected to continue in the coming years. As it does, the external workforce will become increasingly critical to business strategy.
The impact of these changes extends well beyond individual businesses. In fact, the growth of the external workforce affects the daily lives of millions of people—and even the performance of major economies. A 2016 study1 by the National Bureau of Economic Research, a prominent US nonprofit organization, suggests that net job growth in the United States between 2005 and 2015 was due entirely to contingent workers, including temporary and on-call workers, independent contractors or freelancers, and the fastest-growing group: contract employees.
Non-payrollworkers
Servicesproviders
42%of spending is on
the external workforce
20.1%
21.7%Employees
What is the split of your organizational spend across employees, non-payroll workers, and services providers?Mean responses shown
Fig. 1: There has been a big shift in the way work gets done
The multi-channel workforce is on the rise
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Our survey shows that companies are relying on numerous channels to access external talent. We call this use of talent sourced through a variety of channels the multi-channel workforce.
The most widely used method of accessing external talent for utilities is services providers (64%), followed by sourcing talent themselves (62%), staffing agencies (44%), on-demand, online marketplaces for freelancers (42%), and alumni networks (16%). These channels are expected to show strong growth over the next three years, suggesting ongoing, and even increasing, demand and competition for external workers.
The top labor market trends for utilities respondents are the globalization of the labor supply creating greater access to talent, the availability of talent that prefers to work on a contract basis versus being an employee, and millennials and younger generations in the workforce.
The multi-channel workforce is on the rise
Hiring Organization
Channels
Talent
On-demand, Online Marketplaces
Direct Sourcing Staffing AgenciesServices Providers Alumni
The multi-channel workforce: the way work gets done
of utilities executives expect to use on-demand, online marketplaces for freelancers in three years
76%
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Talent strategy is increasingly dependent upon sourcing strategy. Only 26% of utilities executives stated that they strongly agree that their organization has a talent strategy that encompasses employees and the external workforce, despite the latter comprising nearly half (42%) of their workforce spend.
26%of utilities executives strongly agree that their organization has a talent strategy that encompasses their internal and external workforce
The multi-channel workforce is on the rise
Fig. 2: Strong growth ahead across talent channels
Through which of the following sources do you hire your external workforce today? In three years? “Very often” and “Always” responses
In 3 yearsToday
64%80%
62%76%
16%32%
Alumni
44%78%
Staffing agencies
42%76%
On-demand, online marketplaces for freelancers
Source ourselves
Services providers
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In a global economy in which digital skills and other specialized capabilities can make or break a business, meeting the demand for talent at the right time and in the right place is essential. Our survey shows that external labor has become an important means of doing so, while also creating a rich well of talent for staffing core functions across the enterprise.
Seventy-two percent (72%) of utilities executives state that their external workforce is critical to operating at full capacity and meeting market demands, higher than the average of 65% for all industries. Fewer utilities executives report that they would be unable to conduct business as usual without an external workforce (34% of utilities executives, versus 46% for all respondents).
Fig. 3: The external workforce is critical to keeping the lights on
say their external workforce is critical to operating at full capacity and meeting market demands
say they would be unable to conduct business as usual without an external workforce
72% 34%
say their external workforce is critical to operating at full capacity and meeting market demands
say they would be unable to conduct business as usual without an external workforce
72% 34%
It’s about the core
say they would be unable to conduct business as usual without an external workforce
say their external workforce is critical to operating at full capacity and meeting market demands
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Facilities management
Rank 2 Rank 3Rank 1
8% 30% 12%
IT22% 14% 6%
Digital10% 6% 18%
Customer service
10% 14% 4%
Field services36% 2%
Legal2% 4% 10%
Finance4%2% 8%
Product development/R&D
2% 2%6%
Marketing
4% 4%
Manufacturing2% 10%
Sales/Seasonal sales
4% 8%
Cybersecurity2%2% 10%
The demand for external labor is widespread across organizational functions. In utilities, the business functions that rely most heavily on the external workforce are facilities management, IT, and field services.
Which business functions rely most heavily on an external workforce?
Fig. 4: The external workforce is being used widely across organizations
It’s about the core
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It’s about the core
Today, the external workforce is critical in utilities for support services (86%), outsourced projects (72%), and corporate staff (68%), with importance increasing in three years’ time. In fact, all respondents (100%) stated that the external workforce will be critical for sourcing corporate staff to meet business needs in three years.
The external workforce is also critical for sourcing skills in scarce supply. Sixty-two percent state that external workers are important or extremely important today, and virtually all respondents (96%) say this will be the case in three years’ time.
Fig. 5: Staying competitive in the digital age
66%
86%
94%
92%
Support services
Outsourced projects
Corporate staff
Field services/manufacturing
Seasonal work
Staff augmentation
86%
72%
68%100%
54%
52%
48%64%
In 3 yearsToday
of utilities executives say the external workforce will be important for sourcing corporate staff in three years
100%
How important are the following kinds of external workers to meeting your business needs today? In three years?“Important” and “Extremely important” responses
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78%
72%
72%
Reducing risk
Achieving sustainability goals/shrinking our carbon footprint
Managing costs
Increasing speed to market
Operating at full capacity/meeting market demands
Increasing organizational agility
Developing or improving products and services
68%
68%
64%
50%
One of the big ideas behind the use of the external workforce is that it saves companies money, giving them the flexibility to scale their workforces up and down depending on demand—and reduce overhead in the process. Yet, our survey shows that other goals are more important to utilities companies in deciding to move beyond traditional employment arrangements.
About one-third (34%) say the external workforce is a key lever in enabling business performance—much lower than the cross-industry average of 55%; and 54% say the external workforce enables them to improve their company’s overall financial performance—again, lower than the cross-industry average of 62%.
Cost is not the whole story
How important is the external workforce in meeting the following business goals? “Important” and “Very important” responses
Fig. 6: The external workforce delivers on strategic goals
of utilities executives say the external workforce is important or very important to developing or improving products and services
78%
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of utilities executives say the external workforce challenges employees to do their best work
66%
This new and expansive outlook on the value of the external workforce includes the expectation that it provides the flexibility to respond to opportunities when and where they arise (50%), and nearly half (42%) say their external workforce helps them compete in a digital world.
Finding value beyond the hard numbersNon-traditional work arrangements can improve company performance in ways that go beyond traditional business metrics. Utilities executives mostly report positive cultural benefits from the external workforce including challenging employees to do their best work (66%), raising the bar for employees by bringing in new sources of skills and talent (54%), and connecting their workforce to new ideas (52%). Less than half say the external workforce dilutes their culture by including people who are not invested in the company (38%), and creates uncertainty among their full-time workforce about job longevity and pay levels (38%).
Maximizing the value of the external workforce calls for thoughtful and effective management. This includes training and educating these workers, and integrating them into the company culture. Given the size and expected growth of the external workforce—and 72% of utilities executives state that it is critical to operating at full capacity and meeting market demands—it should be on the C-suite agenda.
Cost is not the whole story
To what extent do you agree with the following statements about the impact of the external workforce on your organization? “Agree” and “Strongly agree” responses
Fig. 7: Cultural impacts of the external workforce
Challenges our employees to do their best work
Raises the bar for our employees by bringing in new sources of skills and talent
Connects our workforce to new ideas
Improves our culture by bringing in new people with different backgrounds and experiences
Creates uncertainty among our full-time workforce about job longevity and pay levels
Dilutes our culture by including people who are not invested in the company
66%61%
54%54%
52%49%
50%54%
38%46%
38%46%
Cross-industryUtilities industry
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Visibility is everything
A fundamental truth of business is that you can’t manage what you don’t measure. That makes the lack of visibility into the external workforce a serious problem for most companies. New work arrangements require a new kind of management, and senior executives—the C-suite included—are not paying close enough attention.
Utilities executives are generally not well informed about the who, what, where, and when of their external workforce. Less than half (48%) of respondents are highly informed about who is doing work for their organization when it comes to non-payroll workers, and even fewer (42%) when it comes to services providers. Just over half (56%) know the responsibilities of non-payroll workers, and even fewer (42%) for services providers. The C-suite executives who are leading their functions are generally much less in the know with regard to their non-payroll workers, yet more informed on some details regarding services providers.
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How informed are you personally about the following details of your non-payroll workers?“Highly informed” responses
How informed are you personally about the following details of services providers doing work for your organization?“Highly informed” responses
Visibility is everything
Fig. 8: Poor visibility goes all the way to the top
32%36%40%
Access to facilities
34%Compliance with required licenses and certifications
35%45%
42%Who is doing the work
47%82%
46%62%
58%
Contract terms
51%65%
56%
Quality of work
50%42%60%
Duration of work
49%75%
48%
Access to systems and confidential company information
43%52%
44%
Responsibilities (what are they doing)
53%84%
42%
30%35%35%
Where they are located
28%41%57%
32%38%34%
40%Compliance with negotiated rates
47%71%
46%Number of resources
43%74%
Labor rates
50%81%
56%
Who they are
35%43%
48%
Duration of work (tenure)
45%73%
50%
Access to facilities
40%45%
44%
Access to systems and confidential company information
35%55%
50%
Quality of work
45%61%
40%
Responsibilities (what they are doing)
46%83%
56%
Employees
PacesettersCross-industry averageUtilities
Where they are located
Compliance with required licenses and certifications Progress against milestones and/or deliverables
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Fig. 9: Management challenges abound
Finding high-quality resources at the right time and in the right place
Tracking resource and project quality
Managing digital/cybersecurity
Managing physical security
Compliance with local tax laws, labor laws, regulatory, and privacy requirements
34%
24%
8%
18%
10% 48% 42%
32% 40%
54%
50% 22%
28% 10%
10%
36% 20% 10%
4%
Minimally challenging
Somewhat challenging
Really challenging
Extremely challenging
How challenging are the following aspects of managing your external workforce?
Visibility is everything
of utilities executives say that finding high-quality resources at the right time and in the right place is really or extremely challenging
70%
Financial issues also abound. Thirty-eight percent (38%) of utilities respondents report compliance issues (higher than the cross-industry average of 29%); and 36% report physical security breaches, on par with the average. Thirty percent (30%) say they have experienced overcharges and payment redundancies, digital security breaches, and quality issues regarding resources and/or projects—all in line with the average across industries. However, utilities executives report lower than average unauthorized spend without approval of procurement (16% versus the cross-industry average of 28%) and rates that deviate from an agreed-to rate card or master services agreement (18% versus the average of 25%).
The fact is that a workforce managed ineffectively won’t deliver on its full potential. While most respondents say their company considers all types of labor when starting new projects, and that they look at the total workforce strategically, in reality the current lack of visibility means management does not have a truly holistic view.
How can that visibility be improved? One solution may lie in technologies like advanced analytics and machine learning, which can give companies better insight into their external workforces.
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Visibility is everything
Fig. 10: The utilities industry’s use of advanced technologies to inform workforce decisions
To what extent do you agree with the following statements about your use of analytics and artificial intelligence (AI)/machine learning to inform your overall workforce decisions?“Agree” and “Strongly agree” responses
We use AI/machine learning to help inform our workforce strategy
50%57%
We use AI/machine learning to anticipate talent shortfalls
34%41%
We use AI/machine learning to get real-time visibility into payroll and rate data to inform workforce decisionstive analytics to inform workforce scenarios
48%47%
44%53%
We use predictive analytics to inform workforce scenarios
32%49%
We use AI/machine learning to source talent
40%45%
We use AI/machine learning to inform workforce scenarios
62%56%
We use predictive analytics to anticipate talent shortfalls
Cross-industry averageUtilities
We use data and analytics to help inform our workforce strategy
74%68%
of utilities executives use AI/machine learning to help inform their workforce strategy
50%
Utilities executives are ahead of the cross-industry average in their use of data and analytics to inform their workforce strategy (74% versus 68% cross-industry), and understand the effectiveness of particular talent strategies (58% versus 48% cross-industry). They are also ahead in their use of predictive analytics to anticipate talent shortfalls (62% versus 56%). However, the utilities industry is generally not as advanced in their use of AI/machine learning to inform overall workforce decisions.
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The external workforce: a C-suite imperative
The external workforce:a C-suite imperative
Capture the full value of the workforce transformation by managing your external workforce more effectively:
• Ensure your leadership has visibility into the scope, activities, and quality of your external workforce, the challenges at hand, the benefits realized—and those that could be realized.
• Know the true value of your external workforce, whether they are most critical to getting products to market faster, providing difficult-to-access skills, driving digital transformation efforts, or controlling costs.
• Anticipate the skills you will need in the future—and those in short supply. Determine a strategy to acquire, retrain, or source these skills through the multi-channel workforce.
• Apply workforce strategies to all labor sources, both external and traditional. Embrace the external workforce for the skills and ideas that this talent brings and make them a part of organizational objectives and purpose.
Take action today
v(t)
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Take a moment to consider that on average, utilities executives report that 42% of their overall workforce spend is on non-payroll workers and services providers.
We believe the external workforce must now be a C-suite imperative—not only because of the sheer numbers involved, yet also because it enables such an impressive range of business outcomes such as increasing organizational agility and speed to market.
Utilities also see contingent workers and services providers as a means to access the critical skills and capabilities essential for core operations, and to position themselves for future growth.
At the same time, these vital assets are often critically undermanaged. The key question for every business is this: shouldn’t the same rigor you use to manage your internal workforce be applied to your external workforce? In other words, shouldn’t the external workforce be on your C-suite agenda?
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Around one in ten companies that responded to our cross-industry survey demonstrate markedly superior performance in managing and extracting value from the external workforce. These “Pacesetters” are charting the way forward for others in this still evolving field. They stand out from the crowd in three important ways:
These Pacesetter criteria were used to assign each respondent to a particular group. Even the Pacesetters have much to do to fully capture the value—and mitigate the risks—of this dramatic transformation in the way work gets done.
Beginners Followers Fast Followers Pacesetters
65 Respondents | 8%Do not meet any Pacesetter criteria
290 Respondents | 36%Meet 1 of 3 Pacesetter criteria
372 Respondents | 46%Meet 2 of 3 Pacesetter criteria
77 Respondents | 10%Meet all 3 criteria
Are you a Pacesetter? Access our full report at externalworkforce.fieldglass.comfor a detailed definition of our Pacesetter methodology.
Their visibility into the external workforce. Pacesetters are much more informed on details regarding their non-payroll workers and services providers and are more likely to say that their C-level executives are informed as well.
Their effective management of this workforce. Pacesetters find it much less challenging to perform a wide range of external workforce management duties more effectively.
The business impact of the external workforce. Pacesetters are more likely to say their external workforce enables them to improve their company’s overall financial/business performance and/or compete in a digital world.
The Pacesetters lead the pack
The Pacesetters lead the packThe journey to better business outcomes
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About the research
About the researchOxford Economics conducted an in-depth telephone survey with 800 senior executives from mid-sized to large companies including 50 from the utilities industry. Executives in more than a dozen countries were surveyed in late 2017 and early 2018. The survey focused on labor trends, including the use and management of an external workforce, today and in the future, and its impact on business and financial performance.
Visit externalworkforce.fieldglass.com to access the full report and shareable content including an executive summary, SlideShare and infographics.
About Oxford EconomicsWe are a world leader in economic analysis for business and government. Founded in 1981 as a joint venture with Oxford University’s business college, we specialize in evidence-based thought leadership, forecasting, and economic impact analysis. Headquartered in Oxford, with offices around the world, we employ more than 250 people, including over 150 economists, industry experts, and business editors. Oxford Economics has a worldwide client base of over 1,000 corporations, financial institutions, government organizations, professional firms, and universities.
About SAP FieldglassSAP Fieldglass, a longstanding leader in external talent management and services procurement, is used by organizations around the world to find, engage and manage all types of flexible resources. Our cloud-based, open platform has been deployed in more than 180 countries and helps companies transform how work gets done, increase operational agility and accelerate business outcomes in the digital economy. Backed by the resources of SAP, our customers benefit from a roadmap driven by a continuous investment in innovation.
Survey demographics
Countries: Australia, Belgium, Brazil, Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, the Nordics, the Philippines, Spain, the United Kingdom, and the United States.
Industries: aerospace and defense, banking, capital markets, construction, consumer packaged goods, healthcare, high-tech, industrial manufacturing, insurance, life sciences, oil and gas, professional services, public service, rail, retail, and utilities.
Executives interviewed: procurement (55%), HRand talent management (30%), IT (10%), and finance (5%). A third were C-suite executives; a further third were their direct reports; and the final third were director-level leaders.
Company size (USD):$500 million–$1 billion: 10%$1 billion–$5 billion: 35%$5 billion–$20 billion: 40% $20 billion+: 15%
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1 The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015; Lawrence F. Katz, Harvard University and NBER, and Alan B. Krueger, Princeton University and NBER; March 29, 2016